Proprietary trading firms emerged as the dominant force in India's equity derivatives market, earning ₹45,955 crore in gross trading profits in FY25 and ₹44,483 crore in FY26, according to the latest SEBI study. This represents a slight decline from the ₹460 billion earned in the previous year, with the cohort's gross profit falling nearly 3% as speculative fervor cooled following regulatory curbs. Foreign portfolio investors were the second-most profitable category, earning nearly ₹139 billion, followed by corporates at ₹8,000 crore, mutual funds at ₹2,600 crore, and partnership firms and LLPs at ₹3,000 crore. Individual traders, despite their losses, remained the only category among those tracked by SEBI to post an overall gross loss, with their combined losses narrowing to ₹91,685 crore from nearly ₹1.12 lakh crore in the previous year. The SEBI study revealed that 99% of profits for foreign funds and prop traders were made through algo entities, indicating the increasing reliance on automated trading systems for institutional profitability.
The latest SEBI study reveals the severity of options trading losses, with 90% of retail traders buying options incurring losses in FY26. Options buyers had average losses of ₹1.17 lakh with a median Return on Capital Employed (RoCE) at minus 114%, highlighting the systematic nature of losses in this segment. In contrast, only 43.8% of options sellers incurred losses, though those who did face substantially steeper losses when their bets went against them. For options sellers who ended up making losses, the average loss stood at a staggering ₹51.7 lakh, as per the SEBI report. 93% of retail traders in the options segment were classified as 'only-options buyers', indicating the concentration of risk in this particular trading strategy. The findings underscore the disproportionate impact of options trading on retail participants, with options trading accounting for 92% of the aggregate losses incurred by individual traders in FY26. Additionally, loss makers registered net trading loss close to ₹50,000, with over and above the net trading losses, loss makers expended an additional 28% of net trading losses as transaction costs. Those making net trading profits, incurred between 15% to 50% of such profits as transaction costs.
The study revealed a stark generational divide in derivatives trading losses, with 88.5% of individual traders under 30 years of age incurring losses in FY26, highlighting significant risks faced by young investors in the equity derivatives market. Traders under 30 accounted for 43% of the individual trader base in FY26, while 73% of individual traders had annual incomes of less than ₹5 lakh, and this group accounted for 53% of the aggregate losses incurred during the year. SEBI noted that low-income traders remained particularly active in the derivatives market, with their trading intensity reaching 75 times their portfolio value. The findings underline the extent to which retail investors, particularly those with lower incomes, are participating in a highly leveraged and volatile segment of the capital market. Traders from B30 cities, or locations beyond India's top 30 financial centres, constituted 67% of individual derivatives traders and accounted for 58% of total retail derivatives losses. At the state level, Maharashtra, Gujarat and Uttar Pradesh together contributed 41% of the total net losses incurred by individual traders. The study also shows that traders below 30 years accounted for 43% of individual traders in FY26, up from 31% in FY22, indicating a growing trend of younger participation despite higher loss rates.
The cooling in activity was not sustained, as the average daily turnover in index options fell by 17.4% after the November 2024 measures, but recovered to ₹81,696 crore in the October 2025-March 2026 period, which was 38% above the initial post-measures period. SEBI's measures from November 2024 included restricting weekly derivative contracts to one index per exchange, raising the minimum contract size, requiring upfront collection of option premiums, withdrawing calendar-spread benefits on expiry day and increasing extreme-loss margins for short options positions. The government also raised the securities transaction tax on equity derivatives. The report found that participation declined more sharply after the measures, particularly in options, with unique derivatives traders falling by 25.4% between Q2 and Q4 of FY25, while options participation declined 25.8% and index-options participation fell by 26.8%. The government also increased the securities transaction tax on derivatives in October 2024, with options securities transaction tax (STT) currently standing at 0.15% on premium value and futures STT at 0.05% after being raised again in Budget FY27. The sweeping restrictions on derivatives trading, introduced by SEBI in late 2024, have coincided with a prolonged stretch of underperformance by Indian stocks relative to regional peers. The benchmark NSE Nifty 50 Index is little changed from two years ago, with soaring energy costs following the US-Iran war dealing a fresh blow to sentiment toward the $5.1 trillion equity market. As per Fident Asset Management's Aishvarya Dadheech, "Fiscal 2026 wasn't an easy year to make money" with "Volatility remained elevated and the absence of a clear market trend meant profits declined across investor categories."
The individual trader base in the derivatives market fell 2 million to below 8 million in FY26, marking the first annual decline in over a decade according to SEBI's latest study. This represents a moderation rather than a complete reversal of the structural expansion that began after FY15, when the trader base was around 7 lakh and grew to more than 1 crore by FY25. The number of new entrants dropped 40% during the year, with the number of individuals entering the equity derivatives market dropping to 21 lakh in FY26 from 34.3 lakh in FY25, and was less than half the 4.31 million recorded at the peak in FY24. The enthusiasm of retail investors for the derivatives market showed its first clear signs of waning in FY26 after tighter regulations introduced by the Securities and Exchange Board of India (Sebi) kicked in, as per The Financial Express. Nearly 46 lakh traders who were active in FY25 ceased trading in FY26, compared with 26 lakh exits in FY25, as per The Hindu BusinessLine. Among smaller retail participants, traders with an annual turnover below ₹10,000 plummeted by 37%, while options trading accounted for 92% of the aggregate losses incurred by individual traders in FY26. The Equity Derivatives Segment (EDS) recorded its first year-on-year decline in active individual traders since FY16, with the number of active individual traders falling 18% to 87.5 lakh in FY26 from 106.2 lakh in FY25. The overall equity derivatives traded turnover also declined 9% to ₹585 lakh crore from ₹641 lakh crore, with futures turnover falling 15% to ₹394 lakh crore and options premium turnover increasing 7% to ₹191 lakh crore. However, the study shows that EDS turnover fell by only 5% to ₹202.26 trillion in FY26, with futures turnover by individual traders shrinking by about 20% while options turnover grew by about 16%, indicating that trading activity stayed concentrated among those who continued to participate, especially higher-turnover traders.
The study found a clear correlation between trading frequency and loss severity, with traders active for more than 100 days generating 94% of turnover and 87% of total losses. Their average loss was ₹2.76 lakh, compared with ₹22,000 for traders who traded for 100 days or fewer. About 77% of traders used a peak margin of less than ₹1 lakh, indicating that trading was concentrated among those with small capital. The study found that 90% of such small traders incurred losses in FY26, while among traders with ₹10 lakh to ₹1 crore in losses, the loss-maker rate was lower at 68%. The average loss increased sharply with capital deployed, rising from about ₹5,600 among traders using less than ₹10,000 to ₹960,000 among those using ₹10 lakh to ₹1 crore. A growing shift towards derivatives-only trading was also observed, with 1.86 million traders having no cash-market turnover and participating only in derivatives in FY26, rising from fewer than 100,000 before the Covid-19 pandemic. The study also showed that the average loss among traders deploying less than ₹10,000 in the equity derivatives segment nearly halved, from ₹10,978 in FY25 to ₹5,561 in FY26. Over the five-year period from FY22 to FY26, individual traders cumulatively incurred losses of ₹3.85 lakh crore in the equity derivatives segment. Over FY22-26, the cumulative transaction costs were about ₹1 trillion, with brokerages accounting for about half of it, as per Business Standard.
